Question

The following information is related to Nash Company for 2020.

Retained earnings balance, January 1, 2020 $901,600
Sales Revenue 23,000,000
Cost of goods sold 14,720,000
Interest revenue 64,400
Selling and administrative expenses 4,324,000
Write-off of goodwill 754,400
Income taxes for 2020 1,144,480
Gain on the sale of investments 101,200
Loss due to flood damage 358,800
Loss on the disposition of the wholesale division (net of tax) 404,800
Loss on operations of the wholesale division (net of tax) 82,800
Dividends declared on common stock 230,000
Dividends declared on preferred stock 73,600
Prepare a multiple-step income statement. (Round earnings per share to 2 decimal places, e.g. 1.49.)

Answer 1

Nash Company

Multi-step Income Statement

For the year ended December 31, 2020:

Sales Revenue $23,000,000

Cost of goods sold 14,720,000

Gross income $8,280,000

Operating Expenses:

Selling and administrative expenses 4,324,000

Loss due to flood damage 358,800

Write-off of goodwill 754,400

Total operating expenses $5,437,200

Operating income $2,842,800

Interest revenue 64,400

Gain on the sale of investments 101,200

Income before taxes $3,008,400

Income taxes for 2020 1,144,480

Income after taxes $1,863,920

Loss on the disposition of

the wholesale division (net of tax) 404,800

Loss on operations of the

wholesale division (net of tax) 82,800

Net Comprehensive Income $1,376,320

Dividends declared: preferred stock 73,600

Earnings available to equity holders 1,302,720

Retained earnings 1/1/2020 901,600

Dividends declared: common stock 230,000

Retained earnings, 12/31/2020 $1,974,320

Step-by-step explanation:

Nash's multi-step income statement has separate sections for operating income and other incomes before net comprehensive income. This last income is the point at which dividends are paid out to preferred stockholders before the retained earnings beginning balance are added, and then dividends are paid to the common stock.